High corn prices will prompt a dramatic decline in cattle feedlot use in 2016, according to Agroconsult, a local farm consultancy.
The number of head of cattle in feedlots will drop 11% to 15% this year to around 4.6 million, it announced, based on data compiled during its Rally da Pecuaria survey.
With less confinement and a decline in the use of supplements, the tendency is for ranchers to deliver a reduced number of animals in 2016, Mauricio Nogueira, coordinator of the Rally da Pecuaria, told journalists in Sao Paulo.
Rally da Pecuaria is a form of crop tour for ranching, travelling across 11 states in seven teams to survey cattle rearing conditions across Brazil.
Brazilian beef is still overwhelmingly grass fed with only around 10% of beef production coming from feedlots.
Nogueira forecasts that Brazilian cattle slaughter numbers will drop 0.5% to 1% in 2016 and that beef production will fall 5% to 6% to around 9.2 million metric tons.
Unfortunately, domestic beef demand has also fallen amid one of the worst recessions in Brazil's history.
Local corn prices spiked in the first half of the year following heavy 2015 exports. Now with losses of nearly 20% to the winter corn crop, further price peaks are expected at the end of the year.
According to Andre Pessoa, director of Agroconsult, the domestic corn market will only likely stabilize in the second half of 2017, when prices will fall.
The jump in corn, and soybean, prices has hit poultry and pork operations hard, forcing closure of a number of plants.
The Rally da Pecuaria confirmed perceptions that there is a rapid consolidation of the ranching sector. The survey detected that 20% of operators sell 50% of the cattle.
The most productive are the medium-sized ranchers, with small operations unable to invest in technology and many of the large operations still using cattle mainly to occupy land, said Nogueira.
The consolidation will inevitably mean more and more ranchers are forced to sell.
"This could cause social problems in the interior towns ... What are we going to do with the 50% expelled from the activity," Pessoa told journalists.
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